While other MediaPost newsletters and articles remain free to all ... our new Research Intelligencer service is reserved for paid subscribers ...

Subscribe today to gain access to the every Research Intelligencer article we publish as well as the exclusive daily newsletter, full access to The MediaPost Cases, first-look research and daily insights from Joe Mandese, Editor in Chief.

Commentary

Amazon's Duopoly Challenge Will Benefit Online Publishers

Amazon looks to be the first global company to disrupt the duopoly’s digital advertising revenue. And the timing couldn’t be better, as the duopoly’s (Facebook, Google) dominance
is diminishing, according to eMarketer.

Currently, Google and Facebook control 59% of digital ad spend — a high proportion but one that has dropped almost 2% since 2017. The
duopoly’s share of ad dollars will keep falling until 2020.

The principal reason for this decline is Amazon’s foray into advertising. Not only is the online giant attempting to
leverage its first-party consumer data to break into the ad marketplace, but it’s establishing its DSP business and launching a header bidder solution – Unified Ad Marketplace (UAM)
– to hit the duopoly where it hurts.

Will Amazon be successful in taking competitive advantage? If so, what does that mean for the rest of the industry?

Amazon’s day might be dawning

advertisement

advertisement

Amazon is fast becoming a sizable advertising force; just last year, per eMarketer, its U.S. digital ad profit more than doubled, reaching
$2 billion. It is expected to reach $3.19 billion by 2019. Moreover, WPP – the world’s largest advertising company – channeled $200 million in client ad spend to Amazon in 2017. It is due to increase that share to $300
million this year.

Tellingly, Amazon has also, per Bloomberg, stopped buying ads on Google and started enhancing its own international resources.

It's clear Amazon is
upping its ad game, causing concern to the duopoly. Yet as Google and Facebook brace themselves for a battle, the wider industry may have reason to celebrate.

Good newsfor
publishers

Amazon’s challenge opens multiple doors for smaller publishers that have previously struggled to compete. For starters, it raises awareness amongst brands of viable
advertising environments beyond Facebook and Google. So far, many businesses have chosen the duopoly for advertising needs because they are known quantities with solid brand
positioning, not because they provide the best solution.

Amazon’s rise disrupts such autopilot activity and encourages flow away from the duopoly.

Secondly, Amazon’s
threat presents the perfect opportunity for small publishers to take advantage of interest in alternative ad space, and showcase the benefits of their own platforms. For example, niche
publishers often have a devoted following of readers and cover unique topics, which can be marketed as a chance to reach highly-engaged, precise audiences with targeted offers, such as limited-edition
football boots for committed sports fans 16-24.

All in all, there is an increasingly lucrative opportunity for smaller publishers to contend with the big players in the ecosystem; some may
even be inclined to form consortia to increase the force with
which they tackle the duopoly.

Advantages for advertisers

The advantages of Amazon’s rise to power aren’t restricted to publishers. When it comes to advertising on
the site, Amazon’s halo effect of organic sales through suggested products, product combinations and add-on items offer advertisers exponential circular growth. As trust in Amazon grows, so will
the ROI advertisers can expect. Equally, the larger Amazon’s portion of ad-spend, the less the duopoly can glean, leveling the playing the field for advertisers.

At a general level,
advertisers can also leverage a wider world of choice. By casting their net past the duopoly to include Amazon and other publishers who don’t conform to its ad rules, they can enhance campaign
scale and diversity.

Barriers to growth

It must be acknowledged, however, that these possibilities depend on Amazon navigating potential obstacles. Many advertisers aren’t
bidding for Amazon inventory yet, as they are unaware of its efficacy, which could result in the digital giant missing the mark for projected growth. Additionally, programmatic ad spend has
slowed, following the implementation of the GDPR and U.S. publishers have ceased programmatic advertising in the EU to avoid a potential breach of the regulation.

Further market education
and confidence are needed for Amazon to succeed in its takeover, but the signs are promising. The more spent on Amazon’s inventory, the stronger its market position and the weaker the duopoly.
And more importantly, the greater the opportunities for advertisers to expand their horizons and for overshadowed publishers to step into the limelight as credible alternatives.